KraneShares partners with Nasdaq Dorsey Wright on China ETF rotation model

Oct 28th, 2019 | By | Category: ETF and Index News

China-focused ETF issuer KraneShares has partnered with Nasdaq Dorsey Wright to launch the KraneShares China Rotation Model.

Jonathan Krane, CEO of KraneShares

Jonathan Krane, CEO of KraneShares.

The model provides a risk-managed rotation strategy built around KraneShares’ suite of China and emerging market ETFs and powered by Nasdaq Dorsey Wright’s relative-strength expertise.

Relative strength compares the price performance, or momentum, between securities. According to the philosophy, the absolute momentum of the individual securities is not as important as the relative momentum between them.

Nasdaq Dorsey Wright’s approach determines whether a security’s momentum is increasing relative to another and assigns a buy signal if it is.

The model

The model revolves around a universe of seven equity ETFs and one defensive fixed income ETF providing exposure to commercial paper from Chinese issuers.

Each equity ETF is compared against the commercial paper ETF on an individual relative strength basis. Those funds that demonstrate a positive relative strength signal are included in the portfolio and weighted equally.

If three or fewer equity ETFs pass their individual relative strength tests, the model will allocate a portion of the portfolio to the commercial paper ETF on an equally weighted basis. This gives the model the ability to shift up to 100% of the portfolio allocation to a defensive position during turbulent equity market conditions.

The model is rebalanced on a weekly basis. It is available with no overlay fee to financial advisors and registered investment advisors who subscribe to Nasdaq Dorsey Wright’s platform.

Jonathan Krane, CEO of KraneShares, commented, “As China’s importance within global asset allocation continues to expand, we have seen strong demand from our clients for risk-controlled China portfolios. With Nasdaq Dorsey Wright’s reputation as an industry-leader within financial modeling and $74 billion tracking their smart-beta indexes, we are confident this collaboration will provide our investors with the volatility and drawdown protection they seek in their China-specific allocation.”

Jay Gragnani, Head of Research and Client Engagement with Nasdaq Dorsey Wright, added, “With the launch of the KraneShares China Rotation Model, investors will have a tactical solution to approach the Chinese equity market through a Nasdaq Dorsey Wright relative strength ETF model. This is the first such model that has the ability to target leadership trends within segments of the Chinese equity market paired with ability to de-risk by raising varying amounts of fixed income.”

The ETFs

The KraneShares Bosera MSCI China A Share ETF (KBA US) tracks the MSCI China A Index which captures large and mid-cap representation across China A-share securities – those listed on the Shanghai and Shenzhen exchanges.

The KraneShares MSCI All China Index ETF (KALL US) tracks the MSCI China All Shares Index which covers China-headquartered firms that are listed in Mainland China, Hong Kong, and the United States.

The KraneShares CSI China Internet ETF (KWEB US) tracks the CSI Overseas China Internet Index which provides exposure to US and Hong Kong-listed Chinese internet and internet-related companies.

The KraneShares MSCI All China Health Care Index ETF (KURE US) tracks the MSCI China All Shares Health Care 10/40 Index which targets globally listed Chinese companies operating in the health care sector as defined by the Global Industry Classification Standard (GICS).

The KraneShares CICC China Leaders 100 Index ETF (KFYP US) tracks the CSI CICC Select 100 Index which employs a smart beta approach to companies listed in Mainland China. The methodology selects 100 firms, favouring those with quality, growth, and value characteristics.

The KraneShares Emerging Markets Consumer Technology ETF (KEMQ US) tracks the Solactive Emerging Markets Consumer Technology Index which consists of emerging market companies whose primary businesses are internet retail, internet software/services, purchase, payment processing, or software for internet and E-Commerce transactions.

The KraneShares Emerging Market Healthcare Index ETF (KMED US) tracks the Solactive Emerging Markets Healthcare Index which targets emerging market companies operating in the health care sector.

The KraneShares E Fund China Commercial Paper ETF (KCNY US) tracks the CSI Diversified High Grade Commercial Paper Index which consists of investment-grade paper denominated in renminbi issued by sovereign, quasi-sovereign, and corporate issuers in China.

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